Immigration Reform as the Next Economic Stimulus?

With increased impetus to see immigration reform move on Capitol Hill, more conservative groups are rallying behind evidence that puts pressure on the House GOP.

The U.S. Chamber of Commerce, the Bibles, Badges, and Business for Immigration Reform network, FWD.us, and the Partnership for a New American Economy hosted an October 29th event entitled Americans for Reform: Immigration Reform for our Economy, Faith and Security, where over 600 conservative community leaders from across the country gathered before heading to the offices of their elected representatives.

At the event, the Bipartisan Policy Center (BPC) in partnership with Macroeconomics Advisers, LLC, released a new economic study (Immigration Reform: Implications for Growth, Budgets, and Housing) that analyzed the costs and benefits of implementing immigration reform. Although there have been several economic studies conducted on immigration reform this year, the BPC contends their latest report adds to the existing discourse by providing a more holistic and balanced perspective of potential economic and fiscal impacts.

A number of studies have modeled the costs and benefits of immigration reform. In June 2013, the Congressional Budget Office (CBO) released budgetary and macroeconomic analyses of the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744). CBO updated its budgetary estimates following Senate passage of the bill. CBO found that if enacted into law, S.744 would have an overall positive impact by reducing the budget deficit and contributing to economic growth.1 Other studies have been narrower in focus. For example, The Heritage Foundation’s May 2013 study found that legalizing the current unauthorized population would cost taxpayers several trillion dollars over 50 years but did not examine tax revenues or economic growth.2 Conversely, the Center for American Progress’s March 2013 study found that legalization would grow the economy and increase tax revenue but did not examine the impact on government spending.3

Using the Senate’s “Gang of Eight” immigration legislation as a reference case, the study found that, even when manipulating various assumptions in policy outcome, immigration reform has an overall positive impact on the U.S. economy. In addition to running the models for the reference case, the BPC study used five different scenarios to further analyze the impact of various reforms:

• Scenario 5 is not based on the reference case. This scenario assumes all current unauthorized immigrants leave the country, eliminates all future unauthorized immigration, and makes no other changes to the immigration system.

Immigrant demographics reveal that new immigrants tend to be young, and the results of the reference case indicated that immigration reform would bolster the economy in various ways by adding new, younger workers to the labor force.

Under the reference case, the BCP report found that, by FY2023, only 2 percent of the 9.3 million people added to the U.S. population by immigration reform would be aged 65 or older. Similarly, by FY2033, 13.7 million people would be added, with only 6 percent contributing to the senior demographic (Figure 4).

This influx of younger workers would increase the U.S. labor force by 4.4 percent in FY2033 in the reference case. (See Figure 9 to view the various outcomes in the size of the labor force as compared to different testing scenarios.) The study found that this growth in population and labor force resulted in an overall growth of the economy, as measured by GDP (see Figure 11).

Compared to no reform, the reference case produced a 4.8 percent uptick in GDP by FY2033. Growth was greatest in Scenario 1, where enforcement was more effective and fewer unauthorized immigrants were present than in the reference case.

In addition to other positive impacts in housing and wages, the reference case showed that a larger and younger labor force would decrease federal deficits by about $160 billion in FY2033. The largest deficit reduction came with Scenario 3, which assumed that more employment-based visas would be granted than family-based visas (Figure 17). “Because employment-based immigrants earn higher wages than family-based immigrants, Scenario 3 increased 20-year deficit reduction by about $1.27 trillion, or $5 billion per year more than the reference case.”

The study’s results revealed an opportunity for the House to improve policy provisions that increase border security and effective enforcement mechanisms in order to achieve better economic results for our country. The report specifically found that “immigration reform that does not successfully prevent future unauthorized immigration in combination with broader reforms would not be as effective in reducing the deficit and would result in lower wages than immigration reform with effective enforcement.”

Interestingly enough, the study’s evidence highlighted the worst economic outlook in Scenario 5, which held no new change in immigration policy and assumed all unauthorized immigrants left the country and all future unauthorized immigration was prevented. In the study, this scenario hurt the housing market, increased the federal deficit, and reduced GDP growth by 5.7 percent over the next 20 years.

The BPC study took a broad look at the national effects of immigration reform, but it’s clear that these effects would differ significantly when analyzed on a state level. BPC Director of Immigration Policy Rebecca Tallent mentioned that an additional report examining specific state cases could be the next follow up from the organization’s Immigration Task Force.

To view a more detailed panel discussion of this study, check out the U.S. Chamber’s website here.

The need for reform is apparent, and a majority of economic studies have shown positive impacts for our country. Currently, the House has the opportunity to weigh not only the economic costs and benefits of immigration reform, but also the cultural and political impacts sound legislation could mean for this country.

We’ve seen how rushed, “comprehensive” legislation can fall quite short of its intended ideal. Washington now has a renewed opportunity with immigration reform to do things right.